Show us a business, any business, and our financing experts can probably show you at least a couple business cases for commercial solar acquisition, including options with no money down at contract signing.

For each type of financing including zero-down solutions, however, we also can point out a handful of common mistakes that may erode long-term financial performance.

In a recent podcast on solar financing mistakes that kill profit, and how to avoid them, Sungage Financial CEO Mike Gilroy warned against oversimplifying the sales process and prematurely declaring one best financing option for all projects: “Generically, a consultative sale is the way to go. … Anytime you come into a selling situation strongly biased in favor of one solution, you’re already straining the relationship with your customer.”

Sungage operates in residential solar finance, but as a commercial project partner that has arranged financing for dozens of projects, we couldn’t agree more.

This post will discuss the importance of getting financing right for commercial solar projects. We will address some frequently asked questions about the relative advantages of various financing options, including leases, loans, power purchase agreements (PPAs), and Property Assessed Clean Energy (PACE) bond financing.

Lastly, we will note why many businesses in Arizona and California trust Solar Gain as a zero-down financing partner.

Get the Financing Right

What could possibly go wrong with a financing option that requires no down payment, reliable access to electricity, and energy cost savings?

Let’s count the ways — at least some of them.

1. Missed Incentives

One small error in trying to monetize tax credits and other incentives can offset a strong financing deal. We see it all the time when investors perform due diligence and ask us about bids from other providers. We have found that there is a lot of confusion about how the One Big Beautiful Bill changed federal incentives, for example, and how those changes will have ripple effects for years to come. (You can follow our blog to keep up with changing incentives.)

2. Unclear Energy Costs

Businesses should start with a clear-cut analysis of energy consumption and utility costs before going too far down the road in commercial solar project development. Sometimes we find savings opportunities from reducing demand charges, switching utility rate tariff, and integrating energy storage in ways that you would never know about if you skipped an early-stage energy usage report.

3. Unrealistic Performance Assumptions

Anyone can use historical solar irradiance and project design parameters to model system performance. You can actually ask an AI chatbot to estimate energy production and financial savings and then have it present the data in a tidy customer proposal. But you cannot know if those assumptions will match reality unless you are working with an experienced partner, someone who not only generates assumptions but brings a track record of success.

4. Comparing Solutions

It’s one thing for a service provider to tell you how various financing options work and list out key benefits associated with each one. In an article format like this, all we can do is share our knowledge and invite you to contact us. But when you speak with a service provider, Solar Gain or anyone else, be sure to ask about the full range of financing options available and how to zero in on the best option for your business.

Five Financing Options

Between Arizona and California, Solar Gain uses five financing solutions for commercial solar projects. This post offers some high-level descriptions of each option. Speak with our financing team for more details.

Capital Lease

In any solar lease agreement, a developer installs solar equipment on your property, charging no upfront cost, and the finance provider retains ownership of the project. You minimize capital outlay. The developer provides energy to your business, and you pay in fixed monthly installments. In a capital lease, you are treated as the owner for tax purposes. You benefit from the tax incentives, and you can assume full ownership after finishing lease payments. The financing can often be off balance sheet and secured by the equipment.

“A capital lease is best for for-profit companies with a tax appetite. Typically, you can get $0 down financing and still capitalize on depreciation and federal tax credits.”

Operating Lease

An operating lease has many similarities to a capital lease. Once again, a developer installs the solar project, charging no upfront cost, and retaining ownership of the project. An operating lease is treated like a rental, so you don’t record the system as an asset on the balance sheet. In an operating lease, the finance provider retains ownership responsibilities, including maintenance responsibilities, and this time the finance provider benefits from the tax incentives.

“An operating lease works for for-profit entities with no tax appetite. A leasing company takes the tax credits and depreciation, and it passes the savings on to you.” Operating leases don’t work for non-profits.

Bank Loan

You can secure a bank loan with no money down for a commercial solar project, and many businesses go this route for a customized solution. You can choose between short-term loans and long-term loans, fixed-rate interest and variable-rate interest, debt secured by another asset on your balance sheet or unsecured debt, and different amortization schedules. In general, expect bank loans to require an upfront investment. Typically, a customer will retain the tax credits, and the loan is secured by the cash-flow of the business, as well business or personal guarantees if needed.

“Get low interest rates with longer terms and higher returns by working with your banking partner to accelerate the financing and credit approval process.”

PPA

A PPA deal is similar to an operating lease in that a third-party provider owns the solar equipment and delivers energy to your business. Like an operating lease, the provider also takes care of system maintenance. In this case, however, you are buying the energy on a per kilowatt-hour basis rather than making fixed monthly payments. Also, like a lease agreement, a PPA has no impact on your balance sheet. You do not report it as an asset. As such, the developer can monetize the tax incentives.

“As a third-party owned system, the PPA is great for nonprofits and other organizations looking for monthly savings on their electric bill.”

PACE

Available in California but not Arizona, PACE financing triggers a property tax assessment in which your business pays project costs through your municipal property tax bill. PACE financing comes with one notable limitation: you have to own property to use it. The advantages include the ability to finance projects with no money down, secure financing terms up to 30 years, and maximize returns whether or not you pay taxes.

“California property owners can work with PACE lenders to finance their system with no money up front, by paying a fee attached to their annual property taxes.”

Financing Partnership

Solar Gain has successfully helped dozens of organizations go solar, and install batteries and EV chargers with the options listed above. Every organization is different, and Solar Gain can help consult with you to optimize the financing structure best suited to your needs.

Commercial customers trust Solar Gain because of our strong funder relationships and our track record as a financing partner.

In business banking, relationships are paramount. We bring 2-10 years of history with any lending group involved in one of our commercial solar financing deals. Some PPA providers and banks in our network have been working with Solar Gain for 10 years.

Our knowledge of the customer’s financial objectives—optimizing business or personal tax positions, real estate development for entities with no tax appetite, cash flow for nonprofits seeking direct pay for tax credits—helps match customers with preferred lenders and lenders with preferred customers.

Solar Gain has found a lot of success as a commercial financing partner because we know when to introduce a lender into the commercial solar planning process. We also understand when to transition the financing conversation fully to the lender and when to stay engaged in the conversation to keep the deal moving forward.

It’s easy to find financing providers who say yes for six months only to back away when you need them to perform. We help commercial customers avoid those pitfalls.

🔗Submit the Form or Call (520) 822-8377 to connect with our commercial solar team and find out how to meet the July 4 tax credit deadline.

Written by Robert Neifert